A conforming loan is a mortgage that meets the purchasing guidelines set by Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs) in the US housing market. These loans adhere to specific criteria regarding loan amount, borrower qualifications, and property type. Conforming loans are a widely used mortgage option with attractive features for qualified borrowers. Here's a quick breakdown:
Eligibility:
- Meet Fannie Mae/Freddie Mac standards.
- Minimum credit score (often 620+).
- Healthy debt-to-income ratio (ideally below 45%).
- Down payment (at least 3%, may vary).
- Loan amount under conforming loan limits (set by FHFA, $766,550 nationally in 2024, higher in some areas).
Benefits:
- Lower Interest Rates: Due to reduced risk for lenders, conforming loans often offer competitive interest rates.
- Wide Availability: Most lenders provide conforming loans, making them easy to find.
Considerations:
- Loan Limits: Check your county limits.
- Not Government-Insured: Unlike FHA, VA, and USDA loans, conforming loans lack government insurance.